The tax landscape is ever-changing, and 2023 is no exception. Several IRS regulation changes are poised to impact businesses, and understanding them is crucial to ensuring smooth tax filings. From reduced reporting thresholds to new e-filing requirements, these changes are enough to spook even the most seasoned business owners.
Lowered Reporting Threshold: The $600 Rule
The American Rescue Plan Act of 2021 introduced a significant change that has finally been implemented for the 2023 tax year: lowering the reporting threshold to $600. In simpler terms, business owners are now required to issue a Form 1099 to any vendor or independent contractor who has received payments totaling $600 or more for services rendered during the tax year.
Action Steps for Business Owners
Don’t wait until the last minute to start preparing for these changes. One immediate step you can take is to collect W-9 forms from your vendors and independent contractors. Having these forms ready will help expedite the process of issuing 1099s when tax season rolls around.
Penalties for Non-compliance
Failure to file your 1099s by January 31, 2024, can result in penalties that range from $60 to $310 per form. You read that right—penalties per form. It can add up quickly, turning your tax season into an actual nightmare.
E-Filing: The New Standard
Previously, the threshold for requiring electronic filing of 1099 forms was at 250 forms. However, beginning January 1, 2024, if you file 10 or more returns in a calendar year, electronic filing is mandatory. This is a significant adjustment, particularly for small to medium-sized businesses that may have avoided e-filing in the past.
No More Exceptions for Certain Corporations and Partnerships
Moreover, the new regulations eliminate the e-filing exception for income tax returns of corporations reporting total assets under $10 million. Partnerships with more than 100 partners are now also required to e-file their information returns.
Your Next Steps
If you’re feeling overwhelmed by these changes, you’re not alone. But you don’t have to navigate these shifting waters by yourself. Professional guidance can offer you peace of mind and potentially save you from frightful penalties.
For more detailed information, the IRS provides a comprehensive guide, which can be found here.
Need Help?
Is keeping up with all these changes giving you the chills? Let SBK guide you through it! We believe that clean books can significantly ease your stress during tax season. Contact us today to find out how we can make your tax season less frightening.